HARTFORD, Conn. (AP) — A federal appeals court has ruled that former Connecticut Gov. John G. Rowland’s administration violated state employees’ constitutional rights when it laid off 2,800 workers based on their union membership in 2003, a decision Rowland said will affect other states’ governors and local officials during budget negotiations.

The 2nd U.S. Circuit Court of Appeals in New York ruled Friday that the layoffs violated the Connecticut workers’ First Amendment right of freedom of association with labor unions and ordered a lower court to decide what to award the employees. The ruling overturned a June 2011 decision by U.S. District Judge Alfred V. Covello in Hartford in favor of the Rowland administration, which denied wrongdoing.

The appeals court also ruled that the unions and plaintiff employees can pursue civil penalties against Rowland and his then-budget director, Marc Ryan, for their actions in their individual capacities during the layoffs.

The administration had warned union leaders in late 2002 that it would lay off the workers unless they accepted wage freezes. The unions balked, and the workers got pink slips. Union officials called the layoffs retaliation for refusing to cave in to the administration’s demands and said union members were being singled out. Non-unionized workers, meanwhile, were spared layoffs after officials froze their pay.

Rowland and Ryan disagreed with the court’s ruling and urged state officials on Monday to appeal the decision to the full 2nd Circuit Court of Appeals or the U.S. Supreme Court. A three-judge panel of the appeals court issued the ruling Friday.

Rowland said Monday that the ruling will have a chilling effect on government leaders.

“This decision … will have significant impact on all future budget negotiations here in Connecticut, nationally, and even locally,” Rowland wrote in an email to The Associated Press.

The 2nd Circuit Court noted that no non-union workers were laid off during the 2003 job cuts. At the time, the state government workforce included 37,500 union members and about 12,500 non-union members. The judges also said the layoffs had little effect on lowering state budget expenses and were ordered to try to compel the unions to agree to the concessions.

The court said it’s a well-established principle that union activity is protected by the First Amendment, and other U.S. Circuit courts have backed that view.

The judges also cited a 1990 U.S. Supreme Court ruling in Rutan versus Republican Party of Illinois that said government employers can’t base hiring decisions on political belief and association. The 2nd Circuit Court said the Rutan ruling also applies to employment decisions based on union membership, although the nation’s highest court hasn’t directly decided that question.

Stamford attorney David Golub, who represented the unionized workers, called the court’s decision “remarkable.”

“It’s an absolute upholding of union members’ constitutional rights to belong to a union,” he said Monday. “No state can penalize people for belonging to a union. It very clearly holds that what Rowland did was illegal and unconstitutional. People’s lives were disrupted in what was an illegal act.”

Golub said the appeals court sent the case back to a U.S. District Court judge to decide how much money should be awarded to the laid-off workers for their losses. Golub said the amount of money lost by the workers as a result of the layoffs has yet to be determined.

Although the 2,800 unionized employees lost their jobs, many were later rehired by the state when other workers left their jobs, Golub said. But many of the rehired workers didn’t get their old jobs back and were rehired for less pay, he said.

State officials will be reviewing the court ruling with outside counsel and the state attorney general’s office to determine what steps to take, if any, in response to the decision, said Andrew Doba, a spokesman for Gov. Dannel P. Malloy.

Malloy criticized Rowland later in the day during a conference call with newspaper editors.

“I thought the governor had crossed the line when he did it, to tell you the truth. But the initial (court) decisions didn’t agree with that. Now we’ve got an appellate decision that says that he did,” Malloy said.

Malloy said figuring out how much money is due to the affected employees will be time-consuming. He also said there is no immediate estimate of the cost, but it will be “a bunch.”

Ryan, who now works in the health care industry in South Florida, said he believes the 2nd Circuit Court ruling is flawed because it relied on a set of facts that was agreed upon by the plaintiffs and defendants but didn’t include all pertinent information, including the severity of the state’s budget problems and government officials’ efforts to treat union and nonunion employees the same.

The layoffs were part of hundreds of millions of dollars in labor savings needed to fill a $1 billion deficit in the 2003 fiscal year and deficits of $2 billion and more in the next two fiscal years, Ryan said.

Plaintiffs in the lawsuit, filed in 2003, include state employees, labor unions and the State Bargaining Agent Coalition, an organization of state employee union leaders. The case has been pending for so long because of numerous court filings and rulings, including one by the 2nd Circuit in 2007 that rejected the Rowland administration’s claims of immunity by government officials against lawsuits.

Rowland, a Republican, resigned from the governor’s office in July 2004 amid a federal corruption investigation. He pleaded guilty to a corruption charge and served 10 months in a federal prison camp. He now has an afternoon talk show on WTIC-AM in the Hartford area.